Summary:
- Almost $1 trillion could come back: A reduction in the tax rate on the repatriation of foreign earnings to approximately 5.25% would lead to a significant increase in repatriations and bring back approximately $942 billion more than worldwide American businesses normally would.
- Major increases in spending and consumption: The resulting increase in capital spending by companies and an increase in consumption spending by individual and institutional shareholders would have the following effects:
- An increase of $178 billion to $336 billion in GDP;
- An increase of 1.3 million to 2.5 million jobs; and
- An increase of $36 billion in corporate tax revenues.
- Billions in tax revenues: Contrary to JCT’s modeling, which has been questioned by other experts, the study shows that a tax reduction on repatriations would generate as much as $36 billion in tax revenues at a time when the federal budget is under severe pressure. Revenues would result in the short-term from corporate taxes paid on the repatriated funds and any dividend or capital gains taxes paid on the amounts returned to shareholders.
- Stocks, dividends produce notable economic benefits: Out of the estimated $581 billion of repatriated funds that would go to shareholders, about $192 billion would go to households and individuals. Based on calculations of how people save and spend money, the study predicts that U.S. shareholders would directly spend between $25 billion and $38 billion of the repatriated cash.
- Improved market and consumer confidence: The study reveals that growth in employment and output, as well as the potential for stock market gains likely to result from the repatriation and return of cash to shareholders, would boost business and consumer confidence, which are hovering near record lows.
- Step towards long-term reform: Tyson and her co-authors argue that a temporary tax reduction on repatriations would be a beneficial interim step towards comprehensive tax reform to reduce the corporate tax rate, broaden the corporate tax base and move toward a territorial system.
- Money isn’t coming back at current high rate: Given the current U.S. tax structure, Tyson also illustrates that because of the opportunity cost of the current 35% rate, without such a reduction, most of these earnings will never come back; will not be subject to the U.S. corporate tax; and will never be available to the Treasury or to boost consumption, investment and employment.
